Market Analysis: UK inflation data to be released this week, global bond rally facing another reality test.

The signs of the slowdown in the inflation of the United States, the largest economy in the world, have finally triggered a global bond rally. However, the momentum faces a reality test this week. Global government bonds have recorded their best monthly performance this year, and a US price pressure indicator has slowed for the first time in six months. This has encouraged market expectations of an imminent rate cut by the Federal Reserve in the United States, and investors in other parts of the world also believe that their central banks have room to cut rates. Currently, market attention has shifted to the inflation report in the United Kingdom. Although the UK inflation rate has significantly fallen since reaching an astonishing 11.1% at the end of 2022, investors warn that the path of price decline is not smooth. For the market, this is the latest checkpoint on a bumpy road to determine whether the global fight against inflation is finally coming to an end. “The UK CPI data in the coming week will be crucial, and we believe that the magnitude of the decline may be lower than many people’s expectations,” said Mark Dowding, CIO of RBC BlueBay Asset Management. “This may dampen the enthusiasm for rate cuts.”